France's left-wing leadership starts with a pay cut

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France's new left-wing government started work on Thursday with pledges to combat excessive austerity but better manage public finances, marking the debut with a 30 per cent cut in pay for President Francois Hollande and all ministers.

The sizeable wage reduction was endorsed at a first meeting of the 34-minister team, a day after Germany's government awarded rises to its ministers and Chancellor Angela Merkel, whose pay will overtake Hollande's.

Pierre Moscovici, France's newly-appointed finance minister, set the tone, reiterating Hollande's demand Berlin and other euro zone capitals rework a fiscal pact agreed in March, to add pro-growth measures alongside commitments to deficit reduction.

"What we've said is the treaty will not be ratified as it stands," Moscovici said. "We're firm on this."

With a debt crisis again rumbling louder in the euro zone, the minister, a moderate social democrat like Hollande, went to lengths to say the European push did not mean the Socialists would renege on a pledge to balance the country's books by 2017.

"France is at Europe's heart and we want to stay there," he told journalists at a handover with his centre-right predecessor Francois Baroin.

"We're convinced public debt is an enemy for the country. Our task will be reduce deficits and debt ... this is the task we will address first."

Hollande takes the helm with Europe's second-largest economy at standstill, the unemployment rate close to 10 percent and the euro zone struggling to contain debts that have spooked markets and forced Greece and others into excruciating bailouts.

In a highly symbolic debut, Hollande chaired a first cabinet meeting where the 17 men and 17 women ministers gave the nod to a pay reduction that will trim salaries by 30 percent, knocking the wage Hollande will earn to just under 15,000 euros ($19,100)a month.

The pay cut, implemented by a decree the ministers approved, takes immediate effect and will require a law but be backdated to mid-May in Hollande's case, government spokeswoman Najat Vallaud-Belkacem said.

A government statement said the cuts would reduce the gross pay of ministers to 9,940 euros a month from 14,200 euros and cut the salary paid to both Hollande and Prime Minister Jean-Marc Ayrault to 14,910 euros a month, from 21,300 euros.

The cabinet met on a public holiday at the Elysee Palace, the presidential offices vacated by conservative Nicolas Sarkozy on Tuesday after handing Hollande the country's nuclear codes.

In Germany, which has weathered several years of financial and economic turmoil better than France and far better than the likes of debt-crushed Greece or Ireland, the wage trend was in the opposite direction.

On Wednesday, Merkel's cabinet gave themselves a 5.7 percent rise that will push Merkel's pay up by 930 euros per month from her current base pay of just over 16,000 euros a month.

NOT JUST ABOUT CUTBACKS

Hollande's team, mixing old hands and a lot of new blood, is dominated by moderates and headed by Ayrault, a veteran politician who, like Hollande, has never himself held a national post.

Only five of the 34 ministers have held national government posts before, but several key jobs have gone to long-timers, including Laurent Fabius, who served as France's youngest prime minister, in 1984 at age 34, under Francois Mitterrand.

Fabius, who campaigned for a 'No' vote in a referendum on a European Constitutional treaty in 2005, was keen to sideline that past on Thursday as he took his place in a foreign ministry office once occupied by Robert Schumann, one of the founding father's of the European Union.

"That's behind us now," he told journalists. "What it's about now is pulling out of the crisis and building something different."

Like Moscovici, Fabius insisted the government would be as serious about financial restraint as it was about preventing austerity on a scale that could be self-defeating if it did even further damage to economies in recession or almost.

"You have to walk on two legs," he said. "Budget discipline is one leg and the other leg is economic growth. For now the growth leg isn't there."

Hollande, Merkel and other European leaders meet in late May to discuss the matter and Hollande hopes they will agree to alter the pact agreed last March in Brussels, beefing it up with pledges to tap European development funds and even launch joint bonds, known as project bonds, to fund growth-boosting projects.